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Negotiation

Section 01: Negotiation

Fundamentals

Chapter 01: The Nature of

Negotiation

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 Overview

Everyone negotiates, nearly on a daily basis.

Negotiations occur for several reasons. People fail to

negotiate
• To agree on how to share or divide a limited
resource.
because they
do not
• To create something new that neither party recognize they
could do on their own.
are in a
• To resolve a problem or dispute between the negotiation
parties. situation.

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 Style and Approach

Negotiation is decision making in which two or more parties

talk in an effort to resolve their opposing interests.
• Bargaining describes the competitive win–lose situation.
• Negotiation refers to win–win situations.
Many people assume the “heart of negotiation” is the give-
and-take process used to reach an agreement.
• The most important factors occur before the negotiation or shape the
context around the negotiation.
The author’s insights are drawn from three sources.
• Personal experience, the media, and research.

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 Characteristics of a Negotiation Situation

• Involves two or more parties,

individuals, groups, or organizations. Tangible factors
• There is a conflict of needs; parties include the
search for a solution. price or the
terms of the
• Parties think they can get a better deal
agreement.
by negotiating.
Intangibles are
• A give-and-take is expected.
underlying
• Parties prefer to negotiate and search psychological
for an agreement. motivators,
• Successful negotiation manages such as the
tangibles and resolves intangibles. need to “win.”

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 Interdependence

Most relationships can be characterized in one of three ways:

independent, dependent, or interdependent.
• Independent parties are able to meet their own needs without the help
and assistance of others.
• Dependent parties must rely on others for what they need, subject to
the provider’s whims and idiosyncrasies.
• Interdependent parties are characterized by interlocking goals.
Interdependent parties need and influence each other with a
mix of convergent and conflicting goals.

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 Types of Interdependence Affect Outcomes

Goal interdependence, and the structure of the situation in which

people negotiate, shapes negotiation processes and outcomes.

• A zero-sum or a distributive situation is a competitive

situation where there is only one winner.
• A non-zero-sum or integrative situation is a mutual-gains
situation where goals are linked to achieve a mutual gain.

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 Alternatives Shape Interdependence

Evaluating interdependence depends heavily on the

desirability of the alternatives to working together.
A negotiator’s BATNA is their Best Alternative to a Negotiated
Agreement.
• A negotiator must understand both their own BATNA and the other
party’s BATNA.
• The value of a BATNA is relative to the possible settlements currently
available.
• A BATNA may offer independence from, dependence on, or
interdependence with someone else.
• Every possible interdependency has an alternative; negotiators can
always walk away.

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 Mutual Adjustment

As parties influence each other, they engage in mutual

adjustment, causing changes to occur during negotiation.
• Effective negotiators understand how people will adjust and readjust
and how negotiations twist and turn.
• The best strategy is grounded in the assumption that the more you
know about the other party, the better.

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 Mutual Adjustment and Concession Making

Negotiations often begin with statements of opening positions.

• When one party alters their position based on the other

party’s suggestion to do so, a concession has been made.
• Concessions constrain the bargaining range.
• The bargaining range is the range of possible agreements
between the two parties’ minimally acceptable settlements.

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 Two Dilemmas in Mutual Adjustment

• Dilemma of honesty—concerns how much of the truth to tell the

other party.
• Dilemma of trust—concerns how much negotiators should
believe what the other party tells them.

Give-and-take
Two negotiation tactics create trust.
is essential to
• Outcome perceptions can be shaped by managing joint problem
how the receiver views the proposed result.
solving in most
• Process perceptions are enhanced through fairness interdependent
and reciprocity in proposals and concessions.
relationships.

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 Value Claiming and Value Creation

The purpose of distributive bargaining is to claim value.

• To claim the reward or gain the largest piece of the pie.
The purpose of integrative negotiation is to create value.
• To find a way for all parties to meet their goals.

Most negotiations combine claiming and creating value.

• Negotiators must know when to use which approach.
• They must be versatile and competent with both tactics.
• Often see problems as more competitive than they are.
Coordination of interdependence has the potential for
synergy.
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 Creating Value through Differences

Value is created in numerous ways, and the heart of the

process lies in exploiting differences between negotiators.

Value is created
• Differences in interests.
by exploiting
• Differences in judgments about the common
future. interests, but
• Differences in risk tolerance. differences can
• Differences in time preference. also create
value.

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 Conflict

Interdependent relationships have the potential for conflict.

Conflict is a sharp disagreement of interests, ideas, and so

on.
• When interdependent people perceive incompatible goals and
interference from the other, conflict results.
There are four levels of commonly identified conflict.
• Intrapersonal conflict occurs within an individual.
• Interpersonal conflict occurs between individuals.
• Intragroup conflict is conflict within a group.
• Intergroup conflict is conflict between groups.

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 Functions and Dysfunctions of Conflict

Raises awareness. Win–lose goals require

competitive processes.
Brings change/adaptation.
Misperception, bias, and
Strengthens relationships
emotionality may increase.
and boosts morale.
Productive communication
Promotes self-awareness.
decreases.
Enhances personal
Blurred central issues.
development.
Rigid commitments.
Encourages psychological
development. Magnified differences.
Can be stimulating and fun. Escalation of the conflict.

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 Factors When Managing Conflict

Difficult to Resolve Easy to Resolve

Issue is a matter of principle. Divisible issues.

Large stakes, big Small stakes, little
consequences. consequences.
A zero-sum situation. A positive-sum situation.
A single interaction. A long-term relationship.
No neutral third-party Trusted, powerful third parties
available. available.
Unbalanced conflict progress. Balanced conflict progress.

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 Figure 1.3: The Dual Concerns Model

Access the text alternative for slide images.

Source: Dean G. Pruitt, Jeffrey Z. Rubin, and Sung H. Kim, Social Conflict: Escalation, Stalemate, and Settlement, 2nd ed. (New York, NY: The McGraw
Hill Companies, 1994).

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 Effective Conflict Management

Individuals in conflict have two levels of concern.

• Concern about your own outcomes.
• Concern about the other’s outcomes.

Dual concerns model’s five conflict management strategies.

• Contending is used for trivial issues, not complex issues.
• Yielding is helpful if you were wrong, not with important issues.
• Inaction is appropriate for cooling off, not to avoid a decision.
• Problem solving is for complex situations, not for simple issues.
• Compromise when power is equal or the problem is very complex.

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